How much tariff do we now face?
On April 2, 2025, the US announced 26% reciprocal tariffs on India, which was lowered to 25% in July. Again, in August, additional 25% tariffs were levied as a penalty for India’s continued purchases of Russian oil, taking the total tariff incidence to 50%.
Following an agreement on a framework for an interim trade deal earlier this month, the US announced it will cut the reciprocal tariff on India to 18% and remove the additional 25% punitive tariffs. Currently, India’s goods exports to the US are subject to 25% reciprocal tariff. The February 6 joint statement on the framework for an interim deal proposed lowering this rate to 18% but the change has yet to be implemented.
With the US Supreme Court striking down Trump’s global tariffs and Washington issuing a new order imposing a temporary 15% import surcharge, Indian goods will face an additional 15% reciprocal levy starting Tuesday, against 25%. The temporary across-the-board 15% tariff will apply for the “next short number of months” in addition to the most favoured nation (MFN) status duties, replacing the earlier reciprocal tariff structure.
What happens to the trade deal?
Trump has said that “nothing changes” in the trade deal with India. “They’ll be paying tariffs, and we will not be paying tariffs.”
Also Read: Pause or peril? Takeaways for the world from Trump’s tariff fiascoCommerce and industry minister Piyush Goyal said Friday the interim trade deal is expected to be signed next month, and that it may be operationalised in April. To finalise the legal text for the first phase of the bilateral trade agreement, a team from India is visiting Washington from February 23-26. Trade watchers suggest that New Delhi should re-evaluate its deal with the US and claw back on some concessions as the framework also allows that “in the event of any changes to the agreed upon tariffs of either country, the United States and India agree that the other country may modify its commitments”.
What does it mean for our exports?
Indian exports originally slated for an 18% duty under previous pacts will now see a reduction to the 15% blanket rate, providing temporary relief to exporters.
Are any goods exempt from the new tariffs?
A fact sheet issued by the White House noted that some goods won’t be subject to the temporary import duty because of the needs of the US economy or in order to ensure the duty more effectively addresses the fundamental international payments problems facing the US.
These include certain critical minerals, metals used in currency and bullion, energy and energy products; natural resources and fertilisers that can’t be grown, mined, or otherwise produced in the US or grown, mined, or otherwise produced in sufficient quantities to meet domestic demand; certain agricultural products including beef, tomatoes, and oranges; pharmaceuticals and pharmaceutical ingredients. Other items are certain electronics, passenger vehicles, certain light trucks, certain medium and heavy-duty vehicles, buses, and certain parts of passenger vehicles, light trucks, heavy-duty vehicles, buses, and certain aerospace products. Sectoral tariffs of 50% on steel, aluminium and copper, and of 25% on auto components will continue.
What other options is the US exploring? How does it impact India?
The US can also use Section 338 of the Tariff Act of 1930 which permits retaliatory duties if foreign nations discriminate against American exports. Trump has also threatened the use of Section 301 of the Trade Act of 1974 which targets unfair trade practices but requires lengthy investigations before tariffs can be imposed.
The US has been placing India on its intellectual property (IP) ‘priority watch list’ for many years in the USTR’s Annual Special 301 Report, which identifies trade barriers to American companies due to IP laws of other countries. It has claimed that India has remained inconsistent in its progress on IP protection and enforcement.
Despite India’s reasoning of limiting IP protection as a way to promote access to technologies, Washington has alleged that New Delhi maintains high customs duties on IP-intensive products such as information and communications technology products, solar energy equipment, medical devices, pharmaceuticals, and capital goods. The US trade representative also flagged the lack of predictability around Section 31D and the strength of copyright protection and India not allowing evergreening of patents.
Are there any concerns?
Exporters are seeking clarity on refunds as their American clients earlier imported goods at 25% duty, which would now be 15%.